Which of the following call options should have the highest price for ABC stock, trading currently at $45?
A. X=60, expiring 2 month from now
B. X=60, expiring in 2 weeks
C. X=52, expiring in 2 weeks
D. X=52, expiring 6 months from now
26. You want to write a naked put option on XYZ (an ETF), which is
trading at $32. The put you are interested in has a strike of $25,
expiring in 4 months, and has the following listed in the quote table:
What is the annualized return on your naked put if you have to put up 100% of the cash to cover the put?
27. You bought one call option with strike = 32 for $8 per share, and
two put options with strike = 28 for $7 per share. These options are on
the same security and expire on the same date. The security is trading
at $30. What is this strategy’s maximum loss and, if the security rises
in price, at what price (>$30) will this strategy break even?
A. Max loss = -$22, breakeven price = $54
B. Max loss = -$30, breakeven price = $52
C. Max loss = -$6, breakeven price = $36
D. Max loss = unlimited, breakeven price = $34
28. You buy a share of XYZ stock at $16.00. You also pay $4.50 to buy
a put option with strike price of $16.00 that expires in 5 months and
sell a call option with strike price $19.00 that expires also in 5
months for $3.75. What are the maximum loss and gain of your trade?
A. Maximum loss = unlimited; maximum gain = 2.25
B. Maximum loss = 0.75; maximum gain = unlimited
C. Maximum loss = 0.75; maximum gain = 2.25
D. Maximum loss = 2.25; maximum gain = 0.75
29. You expect the spread between 3-month corn futures and 6-month
corn futures to widen as corn prices drop. Each corn futures contract
represents 5,000 bushels and prices are quotes in cents per bushel.
Assume the current 3-month and 6-month futures are priced at 450.00 and
460.00 respectively. Two months later these contracts are now selling at
442.00 and 458.00, respectively. Which transaction should you have
entered today and how much will be your net gain if done properly after 2
months for 1 contract?
A. Sell 3-month future and buy 6-month future; gain = $30,000
B. Sell 3-month future and buy 6-month future; gain = $300
C. Buy 3-month future and sell 6-month future; gain = $300
D. Buy 3-month future and sell 6-month future; gain = $30,000
30. Which of the following represents a sell signal for technical traders?
A. The 50-day moving average has pierced through to rise above the 200-day moving average price
B. The P/E ratio is trailing the average for the industry
C. The CAPM required return exceeds the expected return based on security analyst consensus
D. The ratio of advancing to declining issues is 1.6 and the ratio of advancing issue volumes to declining issue volumes is 1.4
31. You bought one Eurodollar 3-month future contract at $99.76. If
the price moved down to $99.65, what is your new margin balance and, if
you get a margin call, how much is your required deposit? Assume the
initial margin is $675 and the maintenance margin is $500.
A. New margin = $275, Deposit = $225
B. New margin = $675, Deposit = $0
C. New margin = $400, Deposit = $275
D. New margin = $475, Deposit = $125
33. If you bought a stock that has since declined in price, what is
the best strategy to cut your losses while you are waiting for the stock
to regain its former price, which you are not sure when but you are
somewhat confident it will happen sometime in the future?
A. Sell naked puts
B. Buy protective puts
C. Buy bullish calls
D. Sell covered calls